Business buyers in every industry want to look at your financials so they can clearly see:
- How your business is making money.
- What your business owns.
- What you’re spending money on.
- Exactly what you’re offering for sale.
Buyers want to know those things so they can work out the answers to these questions:
- What is this business worth?
- Will it keep making money after I buy it?
- How much money is it likely to make in the future?
- Should I buy it?
Okay, it’s a bit more complicated than that, but in essence those are the basics. But you’d be amazed at how many business owners don’t realise how much of a difference it can make when you present these financials properly.
Take your personal financial situation as an example. When you apply for a mortgage, your broker will tell you ways to make your position look stronger. You’d clear your hire purchase debt before applying and you would definitely make sure your recent pay rise was factored into the application. You’d try to demonstrate that you weren’t spending too much. You show the bank you’re a great bet to repay your loan every month. Any mortgage advisor will tell you that how you present your case can definitely make the difference between being approved and being declined for that loan.
It’s a similar approach to showing your business in a positive light. It’s not about lying or covering anything up, it’s just about presenting your business in a way that highlights its strengths and shows that it’s a great bet. And I’m here to tell you that the way I can present your business can make the difference between a buyer saying yes and a buyer saying no. It can also help you achieve a higher sale price for your business by providing up-to-date figures that show its full earning potential and showing that you’re spending sensibly and selling a really valuable asset.
One of the most important factors is making the financials clear and easy-to-understand, so they answer all the questions the buyer and their advisers have. When a business’s financials are put together in an impenetrable knot of jargon and confusing transactions, it’s enough to make any buyer throw up their hands and say, “Way too hard. Next contender, please.” Transparent financials make it easy for a buyer to see exactly what’s happening and allows them to concentrate on the story rather than spending all their time deciphering your crazy figures.
If you want the right buyer at the right price for your business, make sure you have the right set of financial data available to your potential buyer.